Do You Need Business Credit?

Credit is an issue that you may not think about when you are organizing your small business's finances. You may assume that your company does not need credit, as you have personal credit cards and a rotating home equity loan that you are using to deal with cash flow issue and other credit related issues. However, if you do not actively manage your company's credit you can find yourself at a disadvantage when it comes to growing your business in the future.

Common Uses of Business Credit

There are several common uses of business credit that you are probably aware of. You can use it to finance computer and office equipment, to buy furniture and to buy basic office supplies. You can also use it to make online payments for things like your Internet service, your utilities and your phone bill.

Company Reliability

While business credit is primarily used as an easy way to finance large purchases and to manage smaller, more regular purchases, it also is used as a predictor of your company's reliability. The better your business credit rating is the more reliable your company is assumed to be, and the worse your business credit rating is the less reliable your company is assumed to be. If you do not manage and develop your business credit then you can send out the wrong message about your company.

New Business Opportunities

Many organizations check out the credit score of companies that they are considering giving a large contract to. They use this information to gauge if the company is good at managing financial responsibilities. If the company's credit score is low or non-existent then the organization offering the contact may assume that the company is not established enough or not responsible enough to meet the demands required by the contract. This can dramatically impact your ability to win new business contracts.

Managing Your Business Credit

There are two important factors that need to be taken into consideration when managing your business credit. The first factor is that it needs to be established and matured. This can be accomplished by opening basic business credit lines, using the lines of credit prudently and making on-time payments. This will help to establish a credit history for your company.

The next step is to actively manage your credit file. This means that you review your credit report at least once a year, that you manage a healthy available credit to used credit balance and that you steadily add credit products to your profile. You will also want to make sure that you do not accumulate too much debt. In fact, instead of using your business credit cards to make purchases, you can use them to pay your monthly bills. Then at the end of the month you can use the money that you have budgeted for your utilities and phone bill can be used to pay off your card balances. This will demonstrate that you can manage your finances and that you are reliable.